Transformation in the Consulting Industry

3. Harnessing Technological Disruption

3. Harnessing Technological Disruption

Technological innovation is having a widespread effect on the consulting industry, as it is across the broader economy and particularly in knowledge-intensive businesses. For many consulting firms, managing the impact of technology and adapting their businesses to effectively respond will be central to ongoing success and resilience. This is manifesting both internally, within consulting businesses, and externally, within the client base. On the one hand, technology is driving the transformation of the operation and management of consulting businesses and, on the other, it is resulting in significant growth in requirements from clients seeking expertise / advice on how to manage their own digital transformation.

New sources of work

Consultants themselves have noted this change with half of all respondents to the Management Consultancy Association’s (MCA) 2019 Member Survey believing that consulting activity in the digital sector will increase greatly in the next 12-24 months, something we also observe among our client base.

According to the MCA 2019 Client Survey, the four most often cited definitions of consultancy were “transformational support,” “external strategic advice,” “innovation support,” and “support with digital & technology”, indicating a preponderance of client focus on forward looking planning particularly as it relates to technological advancement.

Perhaps more tellingly, digital and technology advisory was cited as the number one driver of future consulting needs. Further, two of the top four business challenges identified by client respondents were technology-driven: “Digital deployment” and “Dealing with technological disruptions such as AI and automation”.

Transforming the consulting business

Clearly, technology will be a key driver of work for many consulting firms moving forwards. However, just as clients are seeking advice on managing issues relating to technology, consulting firms themselves will need to evolve and adapt so as not to be left behind in the digitalisation race.

One area which technology will have a significant impact on will be people strategy, and potentially most notably with RPA and machine learning impacting on the delivery of lower value work and driving organisational efficiency.

However, how and where to invest in technology is a fundamental question for consulting businesses.

Very often large capital outlays are required, along with significant investment of time in order to upskill workforces in the use of new technological solutions and there is a real risk of training fatigue.

Many have predicted that the next wave of professional services disruption will come from blockchain, virtual reality or artificial intelligence but, to a large extent, the application of these technologies remains unproven and, at least in terms of the professional services, they remain in their nascency. In particular, the full realisation of AI and the creation and use of neural networks in the short to medium term is unlikely. Arguably the more disruptive and early-stage instances of technological innovation shouldn’t be the main focus of investment for the majority of consulting businesses. Instead the focus should be on harnessing technology which is already proven and widely available.

"There are technologies which are five to ten years old which still have not been rolled out to their fullest extent by the industry."

Test, learn, embed

For some firms, embedding the expertise required to effectively respond to these new demands – both internal/organisational and external/client - will manifest in the acquisition of the new teams and business functions through hiring new talent or by M&A activity; for example, McKinsey buying the Malaysian tech provider VLT Labs. For others, the focus will be on incubating innovation.

Whatever the strategy, the key to successful innovation will be quickly developing and testing ideas, or failing fast, learning and progressing so as to ensure that businesses are not held back by lack of digital capability. In some cases, of course, innovation may be nothing at all to do with technology and will largely be driven by individual firm’s chosen markets and approach to scale.

Internalising technology

Consulting firms are clearly being asked to advise more regularly on technological issues by clients, and require appropriate tech expertise. But this doesn’t always translate into investing in technological preparedness themselves. Here are four reasons why this should change:

  1. Risk preparedness, not least with regard to data management and cyber security
  2. Brand differentiation, for example by showcasing a commitment to innovation and digital literacy in a highly competitive environment
  3. Driving efficiency and agility, including through automation and commoditisation, cloud computing and data mining
  4. Embedding innovation, and creating an approach and culture which can then be marketed to clients

Up next: 04 Achieving growth ambitions

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